Chimei creditors to ease debt payments

BREATHING ROOM:The debt restructuring agreement came after mediation by the Ministry of Economic Affairs, as well as a promise to raise NT$40 billion in new capital

By Crystal Hsu / Staff Reporter

Creditor banks of Chimei Innolux Corp (奇美電子), the nation’s biggest LCD panel maker, agreed yesterday to ease debt repayment terms after the firm promised to increase capital for the coming three years and install a new chair before inking the refinancing pact, bank officials said.

Scores of lenders, led by state-owned Bank of Taiwan (臺灣銀行), agreed to cut debt repayments due this year by 85 percent after a closed-door discussion yesterday morning with Chimei Innolux executives, including its vice chairman Tuan Hsing-chien (段行建), said several officials at creditor banks, who declined to be named.

The technology firm owes NT$240 billion (US$8.02 billion) in syndicated loans to nearly 40 state-run and private banks, with more than NT$70 billion of debt due to be repaid this year.

The debt restructuring plan, which still needs board approval from individual banks, would cut the first-year repayment amount to 15 percent of the total, or to between NT$12 billion and NT$13 billion, allowing the loss-making firm to avoid defaults, bank officials said.

Chimei Innolux posted a net loss of NT$44.45 billion as of September last year on falling panel prices, but full-year revenue gained 4.4 percent year-on-year to NT$501.14 billion last year, company data showed.

The company may pay the remaining 85 percent in the next two years as a result of favorable responses by creditor banks to the debt extension plea, after the Ministry of Economic Affairs mediated in its debt restructuring negotiations with creditor banks last week, bank officials said.

Creditor banks would charge higher interest rates for the debt payments, but the increase would not exceed 1 percentage point, the officials said.

To shore up its finances, Chimei Innolux promised to raise NT$40 billion in new capital in the coming three years, with NT$10 billion to be raised this year, NT$20 billion next year and the remaining NT$10 billion in 2014, bank officials said.

The firm further pledged to fill the vacancy left by former Chimei Innolux chairman Frank Liao (廖錦祥) before signing the debt repayment scheme, likely in middle or late April, bank officials said.

Liao resigned on Dec. 2, citing health reasons. Chimei Innolux said at the time a new chairman would be installed in a week. To date, the position remains unfilled.

Local plastic producer Chimei Corp (奇美實業) owns a 13 percent stake in Chimei Innolux, while Hon Hai Group (鴻海集團) holds about 8.96 percent, according to the stock exchange filing.

The Bank of Taiwan is scheduled to forward the new terms to individual creditor banks two weeks after the Lunar New Year holiday, allowing them to convene board meetings to ratify the contents, the lender said in a statement yesterday.

Chimei Innolux’s debt repayment plea caused a downgrade last week of its credit rating by Taiwan Ratings Corp (中華信評) to “B” from “BBB” on weakening liquidity.